If your bank has been raising its fees and providing you with unsatisfactory interest rates, consider another alternative. A growing number of Americans are looking at credit unions when checking out their banking options.
According to the Credit Union National Association (CUNA), roughly 3.7 million consumers have joined a credit union in 2015 -- a record high -- and more than 100 million Americans currently use them.
Contrary to popular belief, credit unions are not exclusive clubs that require members to be a part of a union or work in a certain profession. While they are required by federal law to restrict their membership base, those requirements are much more relaxed than most people think. For example, in some cases, the only standard requirement for membership is that you live within a certain neighborhood or geographic area in which the credit union operates.
Joining a credit union has many privileges. Here are a few perks to joining a credit union.
1. You're a stakeholder
When you join a credit union, you become a member and have stake in the institution. Credit unions are member-owned, member-run and nonprofit. At a bank, you are simply a customer. While banks strive to make a profit for their stockholders, credit unions aim to pass their profits onto their members.
"This generally means lower rates and fees," says Christina Spitalli, Member Experience Manager at Consumers Credit Union, with offices in Lake and Northern Cook County. "Since credit unions are governed by their members, they make decisions to benefit their members. Banks make decisions to benefit their shareholders and the best interests of shareholders don't always line up with the best interests of the customer."
For example, shareholders may be happy to see the bank adopt new fees to increase revenue -- a move that's unlikely to please their customers.
2. Lower rates for loans
Credit unions tend to charge lower annual percentage rates for loans compared to banks. These include those for credit cards, home equity loans, mortgages, auto loans and personal loans. According to the Credit Union National Association (CUNA), the average interest rate on credit cards charged by credit unions is 11.6 percent, compared to the 17.7 percent average charged by banks. The average interest rate on used auto loans is 2.8 percent for credit unions and 4 percent for banks, according to CUNA. If you have a balance with a high interest rate on your credit card, consider transferring it to a credit union for a lower rate.
3. No ATM fees
If you have a debit card from a bank, but don't use it at an ATM that is a part of your bank's network of machines, you're likely to be subjected to hefty fees. The bank or company that operates the ATM generally charges $1.50 to $3.50 as a user fee for non-customers. In addition, since you're withdrawing money from a third party, your own bank could also charge you an additional fee for conducting a transaction outside of its network. These additional charges could be $2 to $3.50, depending on your bank. With a credit union ATM card, you can withdraw your money fee-free if it's at a participating ATM. Many credit unions belong to larger, surcharge-free networks such as STARsf, Allpoint, and the CO-OP Network, and are easily accessible to their members throughout the country. Even if you can't find a participating ATM, most credit unions don't charge the additional fee for a third party withdraw.
4. Higher interest rates for savings
Being nonprofit, credit unions have a tradition of passing their savings on to their members through various product lines. This includes offering members higher rates on checking and savings accounts, money market accounts and CDs. On average, credit unions provide the highest interest rates for all deposit account types.
5. Free checking accounts
In the past few years, many banks have eliminated free checking accounts in addition to introducing higher minimum balance requirements. Many credit unions offer free checking accounts. According to Bankrate.com's 2016 Credit Union Checking Survey, roughly 76 percent of credit unions offer free checking, up slightly from 2015, when it was 72 percent. Plus, 76 percent of the credit unions surveyed had no minimum balance requirements to avoid fees.
6. Faster personal service
Credit unions are known for offering faster and more personal service. Since they have smaller branches, they can make decisions faster and often develop a more personal working relationship with their members. Some even assign one person to work with you. Large banks can often seem disconnected from their average customer and branch managers don't always have the authority to make certain decisions -- requiring more time for select transactions.
7. More flexibility
Credit unions often offer more flexibility than banks when assessing borrowers for loans. If you have a blemished credit history or lack a large deposit for a mortgage loan, many banks will turn you away for a credit card or a loan. Large banks have rigid requirements on income, credit scores and deposits. Since credit unions are smaller institutions with a member-focused philosophy and local roots, they are more likely to work with you even if you have a less-than-desirable financial past.
This article is sponsored by Consumers Credit Union.
For more information, contact Christina Spitalli, CCU Member Experience Manager, at (847) 672-3432.